NY Court: Body Shop’s Lawsuit Against Progressive Can Advance

A New York court handed an auto body shop a favorable decision last week allowing it to proceed with a lawsuit against Progressive and some of the insurer’s affiliates. The case alleges that the insurer siphoned off business from the defendant and toward its own affiliate network of repairers with defamatory practices.

The suit from North State Autobahn, originally filed in 2007, alleges that the insurer and Nicholas Stanton, a Progressive employee named as a chief defendant, misrepresented North State’s “workmanship, price, timeliness of service and character.”

The misrepresentation diverted customers away from North State and caused more than $5 million in “lost business sales,” according to court documents from the Appellate Division of the Supreme Court of New York, Second Department.

The alleged practices were meant to push customers toward businesses participating in the insurer’s own direct repair program (DRP), of which North State is not a member, according to court documents.

DRPs are agreements made between insurers and networks of repair shops. Insurers suggest shops within those programs to policyholders needing work on their cars after an accident with the intention of increasing the in-network shops’ business. In exchange for that increased customer flow, the shops provide lower repair costs, put a higher priority on those repairs, or both.

Progressive and Stanton had moved for summary judgment dismissing the case, but the court rejected it last week.

Among North State’s claims are that Progressive had falsely told customers that North State would “make only partial payments for repairs,” which would require policyholders to pay for portions of the repairs out of pocket.

In addition, Progressive allegedly undercut North State’s work estimates by half, which was “well below fair-market value,” and misled potential North State customers to “believe that they must have their vehicles repaired at repair shops that were members of the DRP,” according to court documents.

Those court documents outlined allegedly bogus statements made by the defendants to customers, including some indicating that North State was a “difficult shop,” “did not do good work” and others “to the effect that the plaintiffs were ‘a bunch of crooks.’”

DRPs are often advertised as convenient and reliable, with in-network shops often providing guarantees on parts and repairs.

Farmers touts its DRP as a “circle of dependability” that delivers “faster service” and a “high quality of repairs.”

According to the Progressive website, the insurer’s network of body shops offers “repairs you can trust.”

However, insurers in some states are barred from unfair business practices that include falsely telling customers that they are required to go to in-network repairers for claims-related work.

Many states have laws barring insurance carriers from engaging in such practices, which are often referred to as “steering.” These laws, in theory, strengthen business prospects for independent repairers operating outside of insurers’ networks.

In Kentucky, HB 207 went into effect in July. It requires insurance companies to include a written statement with work appraisals informing policyholders that they have the right to choose their own repairer.

Under the bill, the mandated notice must read: “Under Kentucky Law, the Consumer and/or lessee has the right to choose the repair facility to make repairs to his or her motor vehicle.”

About Ben Zitney

Benjamin Zitney has been covering the auto insurance industry for the past 2.5 years. Before coming to Online Auto Insurance News, he produced an extensive company history of the 30-year-old California Joint Powers Insurance Authority and worked at the Cal State Long Beach Daily Forty-Niner as a reporter, copy editor and news editor.